AUDIT COMMITTEE CHARTER

Transcription

1 CARMAX, INC. AUDIT COMMITTEE CHARTER Purpose The purpose of the Committee will be to: Assist the Board in its oversight of the integrity of the Company s financial statements and the Company s compliance with legal and regulatory requirements. Ascertain the independent auditor s qualifications and independence and monitor the performance of the Company s internal audit function and independent auditor; and Prepare the Committee s report to be included in the Company s annual proxy statement in accordance with applicable rules and regulations. Role of the Audit Committee This charter assigns oversight responsibilities to the Audit Committee. Management is responsible for the preparation, presentation and integrity of the Company s financial statements; application of accounting and financial reporting principles; internal controls; and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditor is responsible for performing an independent audit of the consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). The members of the Committee are not acting as experts in accounting or auditing and rely without independent verification on the information provided to them and on the representations made by management and the independent auditor. Accordingly, the Committee s oversight does not provide an independent basis to determine that the Company s financial statements have been prepared in accordance with generally accepted accounting principles or that the audit of the Company s financial statements by the independent auditor has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (United States). Membership and Qualifications The Audit Committee is a committee of the Board of Directors and will regularly report on actions taken by it to the full Board. The Nominating and Governance Committee will recommend for election by the full Board the members and Chair of the Committee, who shall serve at the pleasure of the Board. The Committee shall consist of at least three members. All Committee members must meet the independence requirements of the New York Stock Exchange. In addition, (i) directors fees (including Committee fees) are the only compensation a Committee member may receive from the Company, (ii) no Committee member may be an affiliated person of the Company or any of its subsidiaries; (iii) members of the Committee and its Chair must meet the experience

2 and financial literacy requirements of the New York Stock Exchange; (iv) at least one member of the Committee must have accounting or related financial management expertise, as the Board interprets such qualifications in its business judgment; and (v) if a Committee member simultaneously serves on the audit committee of more than three public companies, the Board must determine that such simultaneous service would not impair the member s ability to serve on the Committee and must disclose this determination in the annual proxy statement. Authority and Organization The Committee may delegate any of its functions to a subcommittee or its Chair, provided that any decisions approving non-audit engagements are presented to the full Committee at its next meeting. The Committee is authorized to obtain advice and assistance, as it believes necessary, from corporate personnel and from external legal, accounting and other advisors. The Company shall pay for the independent auditor, as well as any advisors retained by the Committee. The Committee will establish, with the assistance of management and the internal auditor, a calendar incorporating regular reporting items it requires from independent auditors, the internal auditor and management during the year. Duties and Responsibilities The Committee will have the following duties and responsibilities: Oversight of the Independent Auditor 1. Be directly responsible for oversight of the work of the independent auditor and for retaining and terminating the Company s independent auditor (subject, if applicable, to shareholder ratification). The independent auditor shall report directly to the Committee. 2. Pre-approve all audit engagement fees and terms and all non-audit engagements with the independent auditor. 3. Review and approve the annual scope and audit plan of the independent auditor. On an annual basis, review and assess the performance of the independent auditor according to such criteria as the Committee, in its sole discretion, may determine. In conducting such review, the Committee shall, among other things, obtain and review a report by the independent auditor describing: (i) all relationships the independent auditor has with the Company, including any management consulting services and related fees provided to the independent auditor (so that the Committee may assess the independent auditor s independence); (ii) the firm s internal quality-control procedures; and (iii) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the independent audit firm, and any steps taken to deal with any such issues. In connection with its evaluation of the independent auditor, the Committee should, 2

3 in addition to assuring the regular rotation of the lead audit partner as required by law, consider whether, in order to assure continuing auditor independence, there should be regular rotation of the independent audit firm itself. 4. Review with the independent auditor any audit problems or difficulties and management s response. This review must include any restrictions on the scope of the independent auditor s activities or on access to requested information and discussion of any disagreements with management. It should also include accounting adjustments proposed by the independent auditor but not adopted; communications between the audit team and the audit firm s national office with regard to auditing or accounting issues presented by the engagement; and any management or internal control letter issued or proposed to be issued by the independent auditor. 5. Receive any reports from the independent auditor under the provisions of Section 10A of the Securities Exchange Act of 1934, as amended, relating to a determination by the independent auditor upon audit that an illegal act has or may have occurred, and review with management and recommend to the Board appropriate remedial action to be taken by the Company. 6. Discuss with the independent auditor those matters required to be discussed by applicable auditing standards. 7. Establish hiring policies with respect to employees or former employees of the independent auditor. Oversight of Internal Audit Function 8. Consider, in consultation with the independent auditor, the internal auditor, the chief financial officer and the chief accounting officer, the annual audit scope and plan of the internal auditor. 9. Review with the independent auditor, the internal auditor and the chief financial officer the coordination of the audit effort with respect to completeness of coverage, reduction of redundant efforts, and the effective use of audit resources. 10. At least annually, discuss with management and the independent auditor the performance, responsibilities, budget and staffing of the internal audit function. 11. Review and approve the Company s internal audit charter, and all amendments thereto, governing the functions, activities and responsibilities of the Company s internal audit staff. 12. Review the appointment, replacement and compensation of the senior internal auditing executive. The senior internal auditing executive shall report directly to the Committee. 13. Review significant reports to management prepared by the internal auditing 3

4 department and management s responses. Financial Statements, Periodic Reports and Disclosure Matters 14. Prepare the Committee s report to be included in the proxy statement and review the Company s response to any comments of the Securities and Exchange Commission on the report or any other filing. 15. Before filing and distribution, review and discuss with management and the independent auditor the Company s annual and quarterly financial statements, including the Company s critical accounting estimates underlying the financial statements and other disclosures discussed in Management s Discussion and Analysis of Financial Condition and Results of Operation ; the effect of regulatory and accounting initiatives and any off-balance sheet structures on the Company s financial statements; and any certification, report, opinion or review rendered by the independent auditor. 16. Based on the Committee s review and discussions with (1) management of the audited consolidated financial statements, (2) the independent auditor of the matters required to be discussed by applicable auditing standards, and (3) the independent auditor concerning the independent auditor s independence, the Committee shall recommend to the Board whether to include the Company s audited consolidated financial statements in the Company s Annual Report on Form 10-K for the last fiscal year. 17. Resolve any disagreements between management and the independent auditors regarding financial reporting. 18. Discuss with management and the independent auditor the Company s earnings press releases before their release. In addition, discuss the types of financial information and earnings guidance provided to analysts and rating agencies. In connection with these discussions, management should identify and explain the use of any pro forma or adjusted information presented on a basis other than that prescribed by generally accepted accounting principles. 19. Discuss with management, internal audit and the independent auditor (i) the Company s procedures for identifying significant risks or exposures, (ii) the significant risks and exposures noted, and (iii) for the risks and exposures over which the Committee has been delegated oversight responsibility by the Board, the steps management has taken (including the assignment of management responsibility) to manage, control and monitor such risks and exposures. 20. Review and discuss with management and the independent auditor: (i) major issues regarding accounting principles and financial statement presentation, including any significant changes in the Company s selection or application of accounting principles or adoption of new accounting principles; (ii) major issues as to the adequacy of the Company s internal controls and any special audit steps adopted in light of material control deficiencies; and (iii) analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the 4

5 financial statements, including analyses prepared by management and the independent auditor of the effects of applying alternative accounting principles on the financial statements. The Committee shall approve any changes to the Company s selection or application of accounting and reporting principles in both interim and annual financial statements. 21. Review and discuss reports from the independent auditor concerning all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor. 22. Review disclosures made to the Committee by the CEO and CFO during the certification process for the 10-K and 10-Q and any fraud involving management or other employees with internal controls responsibilities. Meetings 23. Periodically consult with the independent auditor, outside the presence of management, about internal controls and the quality of the Company s financial statements. 24. Meet separately, on a routine basis, with financial and accounting management, the internal auditor, and the independent auditor to review the integrity of the Company s financial reporting procedures, both internal and external. 25. The Committee shall review and reassess the adequacy of these procedures annually and adopt any changes to such procedures that the Audit Committee deemed necessary and appropriate. Compliance and Ethics Program 26. Oversee the implementation and the effectiveness of the CarMax Compliance and Ethics Program. 27. Review the appointment of the Company s Chief Compliance Officer. The Chief Compliance Officer shall report to the Committee. Review with the Chief Compliance Officer, or designated representative, the function and the effectiveness of the Compliance and Ethics Program. 28. Annually review the Company s Code of Business Conduct. Review and consider any request for a waiver of the Company s Code of Business Conduct involving an executive officer or director. Significant Litigation and Regulatory Matters 29. The Committee shall receive, as appropriate, a report from the Company s General Counsel, or designated representative, of any significant legal and regulatory matters, including those that may have a material impact on the Company s financial statements. 5

6 Other 30. Establish procedures for: (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. 31. Oversee the Company s Related Person Transactions Policy. Review and approve or waive, as applicable, any significant conflicts of interest and any related party transactions involving directors or officers of the Company. 32. Perform such other functions as may be assigned by the Board of Directors or as specified in policies adopted or approved by the Board of Directors, including without limitation, receipt of reports regarding any violations of the Code of Business Conduct relating to accounting, financial reporting or internal controls. 33. Evaluate the Committee s own performance annually and report the results of the evaluation to the Board. 34. Review this charter at least annually and update as necessary (with any amendments subject to approval by the Board). Effective as of October 20,